Grain exports remain buoyant

- Last updated on GMT

Related tags: Avian influenza, Influenza pandemic, Influenza

Fears that declining poultry production in Asia could decimate the
grain export market remain unfounded, according to International
Grains Council assistant executive director Richard Woodhams. He
also told that he believes the
sector can survive the frighteningly high freight prices.

"There has been no decline in the market,"​ said Woodhams. "We did look at this question of whether the avian influenzas crisis was affecting sales of grain feed, but there has not been much change."

Woodhams believes that this is because the two most badly affected countries, Vietnam and Thailand, are not big feed grain importers, and have in fact got a feed grain surplus at present. A major decline in the grain export market, he says, would require the crisis to hit bigger maize-importing countries.

"Indonesia, South Korea and Taiwan are major importers,"​ said Woodhams. "If the virus really took hold there, then that would probably have an effect."​ Woodhams estimates that Indonesia alone imports around 1.5 million tonnes of grain a year, most of which is for poultry production.

The American Soybean Association (ASA), which has also been watching the avian flu crisis very closely, is rather more cautious in its assessment. A 10 per cent reduction in poultry production, it believes, could lead to a loss of demand of about 1 million tonnes of soybean meal.

Indeed, Bunge, a major US supplier to Asia for soyfeed for animals, warned that it could soon start to feel the pinch if the avian influenza continues. "While the avian flu will have a negative impact on demand, its effects are too early to quantify,"​ Bill Wells, chief financial officer at Bunge told analysts last week.

"There are expected to be some offsets due to increased demand for soymeal from the Americas,"​ he added, referring to an increase in demand in the US and Brazil for chicken exports to Asia.

For Woodhams, the dramatic increase in freight prices is a greater cause for concern than the effect of the Asian bird flu epidemic. "This has been caused by China buying huge amounts of soya beans, and minerals such as coal and iron ore,"​ said Woodhams. "This caught the freight market on the hop, and the number of vessels has not been able to catch up."

The shortage of freight ships has led to a dramatic rise in costs, a situation that analyst Howe Robinson described as a 'tonnage squeeze.' "If freight costs were to persist, then this could be a problem,"​ he said. "But grain importing countries appear to be pretty resilient, and are finding news ways of accessing their needs."

Woodhams says that the main effect of freight price rises has been to redistribute trade. Australia for example is increasingly being favoured by Asian grain importers because of the cost of transporting grain from Europe or the US. According to a Reuters report, the cost of shipping grain in a Panamax-sized cargo from the US gulf to southeast Asia is about $60 (€47) a tonne, compared to less than $40 a year earlier. Freight from Australia is at least $10 a tonne lower.

"We have been watching countries such as Egypt, which is a big grain importer and a low income nation, and so far it seems to be managing,"​ said Woodhams. "in any case these things go in cycles, and it is amazing how countries can adapt."

Related topics: Processing & Packaging

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